The importance of the global network in suppressing the financing of terrorism

Remarks by the FATF President Bjørn S. Aamo on the importance of the global network in suppressing the financing of terrorism at the United Nations Special meeting of the Counter-Terrorism Committee with Member States and relevant international and regional organizations on preventing and suppressing terrorist financing

United Nations, New York, 20 November 2012

The FATF is the global standard setter for money laundering, terrorist financing and the financing of proliferation. The FATF is a technical and policy making body, intergovernmental, which means in practical terms that we are what our members want us to be, and we do what our members want us to do. Our activities are governed by our members at plenary meetings that take decisions based on consensus.

Our mandate is set at the Ministerial level. Our current mandate was set when more than 30 ministers met in April 2012 in Washington and covers an eight year period until December 2020. The main tasks that we were given are to set the international standards on fighting illicit finance, to promote effective implementation of these standards and to identify vulnerabilities to protect the international financial system from misuse.

The FATF’s mandate as the standard setter to counter illicit financing is based on important United Nations decisions. We are grateful for the support that the UN has given to us throughout the years, and for your endorsement of our work. In this respect I should mention UN Security Council Resolution 1617 (2005), and the General Assembly Resolution 60/288 (2006). But these are just examples of your continued support for FATF.

Membership and the Global Network

FATF has grown out of a small group of like-minded countries in the early nineties, to a body where 34 member countries, 2 member organisations and eight associate members meet. These associate members are our eight so called FATF-style regional bodies (FSRBs). These regional bodies gained a stronger status in our new mandate and take part in all our activities, all our working groups they are active, they have rights and obligations. All in all, this is called the Global Network of FATF, with more than 180 countries who all have endorsed the FATF Standards.

The FATF and FSRBs continue to enhance their cooperation at all levels. This year for  the Norwegian Presidency, we have made it a priority to further integrate the FSRBs and FATF.

FATF Recommendations and UN Instruments

The FATF Recommendations are elaborate technical standards that touch upon regulatory and supervisory, law enforcement, and legal issues. As the FATF Executive Secretary will set out, we have chosen a holistic approach to fight terrorist financing and money laundering. Of course having an integrated set of Recommendations against terrorist financing is less resource intensive and more effective for countries than doing things one by one. We require the freezing of designated terrorist assets without delay and we require criminalisation of terrorist financing. In support of an effective implementation of the criminalisation of terrorist financing, we  make banks and other relevant businesses report suspicious transactions, to allow experts to determine whether there is a terrorist link, or some economic crime involved or if the transaction has a legitimate background. Once banks or other businesses report on their suspicions, they do not know exactly. It would be normally be for the experts, working closely with police and others to find if there is a terrorist link, if it is economic crime or if there is some good reasons for a transaction which at first glance may look suspicious. But this integrated approach is very much the idea of the FATF work and I think such an integrated approach is what makes us a good instrument to carry out the intention of United Nations Resolution in fighting terrorist financing. If we did not have access to the integrated approach, the cooperation with supervisors (my background is financial supervisor for many years), the cooperation with banks and others, we wouldn’t be able to trace terrorist funds.

Some of our Recommendations are specifically designed to assist in the implementation of UN instruments. But as I said, it is part of a broader set of recommendations and the UN Convention against terrorist financing and the Resolution against terrorism, 1373, all play key roles as background for what we do but it is the financing part which is where our expertise comes in.  For the FATF membership it is important to ensure that the Recommendations assist countries in the implementation of UN instruments, and complement these. Because our Recommendations focus on technical issues, we may cover additional technical issues that are not covered by the UN instruments. However, there are no contradictions and there are basically a broad consensus and coordination between the FATF and the UN. So, like I said, you may, as a UN body, look upon the FATF as a practical means to achieve your aims in the financial area and to prevent the financial side of preparing terrorist acts.

Let me underline that all our members are UN members. We base our work on the basis of the United Nations and we have a very close cooperation with the UN staff on the follow-up and the UN staff are always attending our meetings and giving highly useful advice on how we should follow-up the common goals

Progress achieved

The compliance with the FATF’s Recommendations specifically related to terrorist financing seems to be growing, we are making progress in some areas but we have to admit that in some areas it’s going slowly. Challenges remain, and the FATF Executive Secretary will come back to some of these.

Since 2003, FATF, FATF-style regional bodies, IMF and World Bank have all used the same methodology for assessing compliance with the Recommendations and most countries have already been assessed. These assessment reports have given us a real insight to the level of compliance of countries with the international requirements. This is valuable information for technical assistance providers, who can act much faster to identify needs and to assist countries. Undertaking assessments is not an aim in itself, the aim is to identify and effectively address issues and to ensure compliance.

As part of our mandate to identify vulnerabilities to protect the international financial system from misuse, we are alerting countries of the necessity to address strategic deficiencies. Non-compliance with the UN Convention against Terrorist Financing or the freezing requirements of United Nations Security Council Resolution 1373 is considered to be a strategic deficiency. Through this process, several countries have already improved their systems to fight terrorist financing, and more are to follow. Informally it may be called the “name and shame” system, where we name the countries that are not doing a good enough job and thus encourage them to get all matters in order. I would say that this is one of the strongest sides of the FATF: that we not only make recommendations, we also have a system to ensure that the recommendations are being implemented.

Since the addition of counter terrorist financing requirements to the FATF Recommendations in 2001, the FATF and its FATF-style regional bodies have gained a better understanding of terrorist financing risks, methods and trends. We benefited from this experience when we revised the FATF Recommendations in early this year.

In addition, we have shared our knowledge with practitioners across the globe, through Interpretative Notes, Best Practice Papers, Guidance Papers and Typologies Reports. In preparing these documents we have consultation and dialogue both with private business sectors and with the civil society. We attach high priority to this dialogue. All of these activities have considerable strengthened the global shield against terrorist financing. These documents are publicly available, and we welcome further feedback on this material from government and others.

Lastly, we will soon commence a new round of evaluations, the fourth round of evaluations. Another lesson learned from the past 10 years is that we need to widen our scope, from assessing technical compliance, checking that the laws are there, to assessing compliance and effective implementation. That the laws also work in practise. This will be on the top of the agenda when preparing for the fourth round.

With this, Vice Chair, distinguished representatives, I thank you for your attention.

The FATF, UN and member countries focus on preventing and suppressing terrorist financing

• Opening remarks at the Special Meeting of the United Nations Counter-Terrorism Committee on 20 November 2012
• Tackling terrorism financing: the revised FATF standards